Public IP licensing companies (PIPCOs) are very much alive and some company shares are doing surprisingly well, despite increased obstacles to patent licensing.

PIPX reported a 20.4% gain for the 3Q vs. just 3.3% for the S&P 500.

It was the PIPX’s best performance since the index began tracking IP licensing companies in 2011. The PIPX is a capitalization-weighted, price-return measure of the change in value of this segment of publicly traded companies.

“InterDigital and Tessera, comparative giants in market value, were responsible for 20% of the index move,” said Dr. Kevin Klein, Vice President and GM of Products and Licensing at VORAGO Technologies, who compiles the data. “Acacia was the biggest individual gainer, up 48.2%; WiLAN was the biggest loser, down 39.4%. ”

High Volatility

It is difficult to attribute any one specific factor to the record quarter. However, PIPX has been volatile, and somewhat counter-cyclical since its inception. The index could be seen as a hedge against S&P 500 performance. Additionally, patent licensing and sales have started to come back, and patent damages awards are being paid, although at reduced amounts.

The Patent Trial and Appeal Board has been instituting fewer Inter Partes Reviews (down to about one-third of petitions filed), but is still seen by many as a somewhat arbitrary impediment to patent licensing and enforcement.

The value of $1 invested in the S&P 500 in Q3 2011 would now be worth $1.62 while the value of the same $1 invested in the PIPX would be $0.68.

PIPX Performance by Quarter

Added to the index is FORM Holdings (NASADQ: FH), a diversified holding company that specializes in identifying, investing in and developing companies with superior growth potential. Removed were Vringo, which was absorbed by FORM Holdings, and Unwired Planet, which was delisted on June 18.

In what some patent holders are hoping will be a harbinger of things to come, publicly traded IP licensing companies are enjoying an unusually strong second quarter.

Year to date performance for some of the key players include Marathon (MARA), up 40.62% as of the close of the market on May 17. This is as the S&P 500 performance has dwindled to a mere .16% YTD.

MGT Capital Investments (MGT) is up an astounding 1,704.35%, in part because cybersecurity pioneer, John McAfee, is about to be named CEO.

“Until recently, relentlessly negative information about patents and holders has been a challenge to patent licensing and sales activity,” one analyst observed.

“It may finally be hitting opcos and the courts that not only are there opportunities out there for amiable transactions that benefit all parties and avoid disputes, but an asymmetric market for patent transactions that depresses value is potentially very dangerous for everyone.”

Others performers were Inventergy(INTV), up 14.91%, Finjan (FNJN), ups 19.13% and WiLAN (WILN), which has risen an impressive 95.4% since January 1.

Not all PIPCOs have performed well. Stalwart RPX (RPXC) was down 17.82% and Spherix (SPEX) was down 24.56%.

Improving Conditions

The stock performance is a result of a diverse contributions, including $10 million in financing for Finjan, and $25 million settlement for Marathon from Apple.

Additionally, the courts have been ruling more favorably for patent enforcers, including increasing the likelihood of wilfulness. The Patent Trial and Appeal Board (PTAB) is showing some signs of acting more fairly, too.

Operating company patent acquisition activities have increased, too, in a sign that we may have hit a bottom and patent values will be creeping up if they have not already.

For a more complete list of PIPCOs and their recent performance, visit the IP CloseUp 30®here.

The eagerly sought bottom for publicly traded patent licensing companies may have been reached according to the data provided by an intellectual property index that tracks stock performance.

The PIPX public IP licensing index was up 13.1% vs. a barely positive 0.8% for the S&P 500 in the first quarter of 2016. This was the best quarter for the PIPX since it began tracking public IP licensing companies back in July 2011.

Rebound or Bounce?

Is this merely a “dead cat” bounce from PIPCOs (public IP licensing companies) having been beaten down over many quarters? Do the results reflect the relative strength of a few large players?

Or is the sector actually rebounding from over-correction which has devalued many good patents? From this observer’s perspective, it is too soon to tell.

The S&P has dramatically outperformed the PIPX since the IP index’s inception, almost five years ago, when patent values were at a record high. Exceptions have been the second and fourth quarters of 2014 (see graph below).

“The change in value of the component companies (below), ranging from +78.6% for Virnetx to -34.4% for Vringo,” said Dr. Kevin Klein, Vice President and General Manager of Products and Licensing at Vorago Technologies, a semiconductor company. “Parkervision (1:10) and Unwired Planet (1:12) had reverse stock splits this quarter. Vringo effected a reverse 1:10 stock split in Q4. Prices and valuations are adjusted to reflect these splits.”

Market Cap Weighted

The PIPX is a capitalization-weighted, price-return measure of the change in value of a segment of publicly traded companies. The performance of more highly valued companies, such as InterDigital (IDCC), Rambus (RMBS) and WiLAN (WILN) in the first quarterhad the greatest positive impact on the overall index. The PIPX was brought down less strongly by the poor performance of by Acacia, Neonode, Vringo and Unwired Planet, whose market cap have shrunk.

Many of those who follow PIPCOs do so in conjunction with the IP CloseUp 30®, a real-time index of individual company performance in this sector, which also provides up-to-the minute news and updates. Readers also can quickly find market capitalization information there. The URL can be copied and placed on your home screen or home page.

The PIPX index is designed to provide a measure of the market value, and hence a reading of the relative health of the publicly traded intellectual property licensing sector. The index consists of 13 companies with a primary focus of licensing and enforcement of patent intellectual property.

In addition to a focus on intellectual property, the companies must be publicly traded and have a market capitalization greater than $100M. Since being added to the index, the market caps of many of the companies have shrunk below $100M. The index was initiated with a value of 100 on July 1, 2011.

IP CloseUp 30 is a handy tool for those who want to track the most active IP stocks in an instant.

IP CloseUp is pleased to announce the IP CloseUp® 30 a free, all-in-one information update of the leading patent stocks. A click or a tap is all investors, innovators, lawyers and or businesses to track the ups and downs of the rapidly expanding universe of IP-sensitive stocks.

In addition to Acacia, WiLAN and Virnetx, smaller players like Marathon Patent Group, Augme Technologies and MGT also are represented. The list will be updated periodically and companies are likely to be added or dropped.

Criteria for inclusion in the IPCU 30 index includes:

– A company must have IP rights, typically patents, as part of its core value proposition.

– The company must be publicly held for at least one month and reporting.

– Companies may hold significant IP rights but do not have to be out-licensing or direct monetization businesses.

*MOSAID is listed because it had a purchase value of $594 USD when it was taken private by Sterling Partners in late 2011 and is likely to go public or be sold to a public entity at some time in the future.

Expanded List

Our goal is to expand the list beyond 30 companies and to include more IP-rich companies whose model does not necessarily include monetization or enforcement-driven patent licensing. Not all the companies on the current list are non-practicing (patent owning) entities (NPEs),

or so-called patent assertion entities (PAEs) that have been established to solely to enforce. Examples of these companies include Document Securities Systems and Single Touch, which are small, potentially under-priced operating companies with significant patents.

Companies listed in the IP CloseUp® 30 tend to be more directly affected by developments regarding their IP rights. For example, if Samsung settles a dispute with Apple for $1 billion, it is barely a blip on either company’s radar. It’s may not even be worthy of an 8K filing. If an IPCU 30 company secures a license for say $10 million, it is not only material, it is likely to move the corresponding revenue needle and stock price.

The five menu-tabbed views based on Yahoo! Finance data found in the IP CloseUp® 30:

Basic: This includes pricing and trading information, as well as market capitalization or market value. It also provides access to a chart and recent information, including key statistics. Scroll down for the most recent company news.

Ottawa, Toronto and Waterloo together comprise a leading center for valuable patents and IP expertise.

To most people Ontario conjures an image of ice hockey and maple leaves, not intangible assets. But the province bordering the U.S. on the north is among the most abundant areas globally for invention rights, strategists and investors.

Among the notable patent businesses in Ontario are UBM Tech Insights outside of Ottawa, an information services and consulting firm for technology companies that wish to leverage their IP assets. Chipworks, also in the Ottawa area, specializes in reverse engineering products like computer chips to identify infringement and difficult to identify prior art.

Another Ottawa company, MOSAID Technologies Inc., is a leading intellectual property management company. MOSAID, with 5,400 patents, monetizes IP in the areas of semiconductors and communications, and develops semiconductor memory technology. MOSAID was taken private in 2011 for $590 million by Sterling Partners, a U.S. private equity firm. Like UBM, and Chipworks, MOSAID has offices worldwide.

WiLAN (NASD: WILN) is an Ottawa-based, publicly traded IP licensing business. In 2011, it failed in an attempt at a hostile bid to acquire MOSAID. Both MOSAID and WiLAN (3,000 plus patents) are built on a tradition of R&D, and sell or have sold products, file patent applications, and acquire them from others.

Waterloo-based Research in Motion which makes the Blackberry, once the leading smart phone in the world. Research in Motion (NASD: RIMM), has an extraordinary portfolio of some 3,600 patents said to be worth over a billion dollars.

Nortel, based in outside of Toronto in the western part of the province, in Mississauga, Ontario, filed for bankruptcy protection in 2009. In 2011 it sold 6,000 of its patents for $4.5 billion to the Rockstar Consortium, comprised of Apple, Microsoft, Research in Motion, Ericsson, EMC and Sony.

Rockstar, located in Ottawa, is run by John Veschi, former Chief IP Officer of Nortel, and is actively licensing its lucrative portfolio. Recently Apple bought 1,024 patents from it.

In a case that made international headlines Toronto-based i4i, Inc., a leader in the design and development of collaborative, XML-based content solutions and technologies, won a patent infringement decision against Microsoft for damages in excess of $300 million. It was appealed to the U.S. Supreme Court, which rarely hears appeals of patent disputes, and affirmed 8 to 0.

Also Toronto-based, Northwater Capital (Northwater Patent Funding or NW IP Fund), helped to finance the i4i dispute against Microsoft. Northwater is a private investment company with offices in Toronto and Chicago. Northwater invests proprietary and client capital in intellectual property based investments, green energy endeavors and proprietary trading.

Canadians active in U.S. IP activities include Terry Dalzell (Quinn Pacific), Kent Richardson (former head of IP for Rambus), Kevin Rivette, formerly of IBM and Boston Consulting and Boyd Lemna, Senior Vice President of Licensing at Personalized Media Communications. Peter Misek at Jefferies & Company (and prior to that JP Morgan), one of the leading equity analysts in IT and storage, is from Toronto. (Apologies to the many people not mentioned.)

* * *

What’s up with Canada? At one time the cheap Canadian dollar was attractive to U.S. businesses that required expertise-intensive reverse engineering, such as patent defendants and some plaintiffs. With the Canadian and U.S. dollars now worth about the same, there is still good reason to rely on Canadian IP talent.

Canadians appear to be less conflicted than their U.S. neighbors about monetizing intangibles, their own and others’, and they have many with the right combination of technical, legal and business experience to do so — a hat trick if there every was one.

Evolution of IP Deals from Simple Licenses to Complex Portfolio Sales and M&A will be a Focus at LES Conference

The rapid evolution of patent transactions will be the focus of a presentation and discussion at the LES North America meeting in Toronto, Canada.

Patents have fared best among IP as financial assets, and today can be leveraged in different ways. Invention rights played a critical role in Google’s acquisition of Motorola ($12.5 billion, 17,000 patents, 6,000 applications) and in Nortel’s bankruptcy sale to the Rockstar Consortium for $4.5 billion. Buyers included Apple, Microsoft, Ericsson, RIM, Sony and EMC.

Patents have certainly played a part in the smart phone wars, with some of the largest damages awards granted in this area. (See Apple v. Samsung.)

The evolving role of patent transactions, or “Patent Transactions in Transition,”will be the focus of a workshop moderated by IP CloseUp’s Bruce Berman (of Brody Berman Associates) at the Licensing Executives Society annual meeting on Tuesday, October 16 at 2:00. It’s session 3E. The LES meeting this year is being held at the Sheraton Centre Hotel, 123 Queen Street West.

For the latest news on patent licensing companies click below:

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

Follow IP CloseUp

Follow us on Twitter & LinkedIn & Facebook

Advertisement

Advertisement

Advertisement

Advertisement

Advertisement

About Bruce Berman

I'm a long-time intellectual property observer, adviser and editor, who is in close close contact with the leading holders and most influential people. I track the latest trends and developments, and monitor patent and other IP transactions, strategy and performance.

Since 1988 I have been working with IP holders, managers, lawyers and investors to properly explain the importance of their assets to key audiences, frame disputes and convey transactions.

My five books, including the IP best-seller FROM IDEAS TO ASSETS, deal with IP rights as business assets. THE INTANGIBLE INVESTOR, the column I have been writing for IAM Magazine since 2003, looks at ways IP rights impact stakeholders. For my complete bio visit www.brodyberman.com or click on the link below.